Thursday, April 10, 2014

EVERYBODY PANIC! (Not)

Yahoo Finance: Market nose dive...
Bloomberg: Nasdaq falls most since 2011...
MSN Money: Nasdaq falls 3.1%, worst since Nov. 2011...
Drudge Report: Stocks collapse - Nasdaq plunges...
CNBC: 2014 crash will be worse than 1987's: Marc Faber 

The S&P 500 index fell 2% today, which is hardly a "collapse" or "nose dive".  What the headlines don't tell you is that after the Nasdaq fell more than 3% in one day November 2011, it went on to gain nearly 80% in less than 3 years.  So much for today's drop signalling a crash.

Although we had a 5% correction (over several days) in late January, it was barely a correction, and it wasn't enough to cause real fear in the market; the resulting lingering complacency is bad for prices in the short-term.  The last correction of 10% or more was in the Spring of 2012, so I think we are still overdue for a decent fear-inducing correction.  A 10% correction in this case would take the S&P 500 index down to about 1700.

The Internal Price Forces numbers are still on the positive side of neutral at 6.1 out of 10, and I don't see an official pre-crash pattern in the S&P or in the Dow, so the bots (and my own judgement) are still bullish on a multi-month time frame.  I expect this correction to bottom out over the next few weeks, accompanied by more pessimistic headlines, after which the long-term rally will resume.

1 comment:

Cathy said...

My husband and I were wondering about this.
Whew.
Thank you.